The Hague Convention on Choice of Court Agreements: Creating an International Framework for Recognizing Foreign Judgements

Brigham Young University International Law & Management Review Volume 3 Issue 1 Article 3 5-1-2007 The Hague Convention on Choice of Court Agreements: Creating an International Framework for Recognizing Foreign Judgements Matthew B. Berlin Follow this and additional works at: https://digitalcommons.law.byu.edu/ilmr Part of the Courts Commons, International Law Commons, and the Jurisdiction Commons Recommended Citation Matthew B. Berlin, The Hague Convention on Choice of Court Agreements: Creating an International Framework for Recognizing Foreign Judgements, 3 BYU Int'l L. & Mgmt. R. 43 (2006). Available at: https://digitalcommons.law.byu.edu/ilmr/vol3/iss1/3 This Comment is brought to you for free and open access by BYU Law Digital Commons. It has been accepted for inclusion in Brigham Young University International Law & Management Review by an authorized editor of BYU Law Digital Commons. For more information, please contact hunterlawlibrary@byu.edu.

THE HAGUE CONVENTION ON CHOICE OF COURT AGREEMENTS: CREATING AN INTERNATIONAL FRAMEWORK FOR RECOGNIZING FOREIGN JUDGMENTS Matthew B. Berlin * I. INTRODUCTION Until recently, with a few specialized exceptions, the United States was not a party to any treaties or agreements governing the recognition and enforcement of foreign judgments. 1 Generally, the lack of an international agreement has not caused problems for foreign parties seeking to enforce a judgment in the United States because U.S. courts employ a liberal approach to recognizing and enforcing foreign judgments. 2 Other countries, however, do not extend the same treatment to U.S. judgments. 3 * Matthew B. Berlin is a J.D. candidate at American University s Washington College of Law (2007). He earned his B.A. in International Relations at Tufts University. 1 Russell J. Weintraub, How Substantial Is Our Need for a Judgments- Recognition Convention and What Should We Bargain Away to Get It?, 24 BROOK. J. INT L L. 167, 167 168 (1998); see also William W. Park, The Relative Reliability of Arbitration Agreements and Court Selection Clauses, in 14 INTERNATIONAL DISPUTE RESOLUTION: THE REGULATION OF FORUM SELECTION 3, 8 9 (J.L. Goldsmith, ed., 1997) ( [T]he United States is not a party to a single treaty providing for enforcement of judgments ); R. Doak Bishop & Susan Burnette, United States Practice Concerning the Recognition of Foreign Judgments, 16 INT L L. 425, 427 (1982) (observing that the Convention Between the United Kingdom and the United States for the Reciprocal Recognition and Enforcement of Judgments in Civil Matters, 16 I.L.M. 71 (1977), would have been the United States first treaty concerning the recognition and enforcement of foreign judgments, if it had been agreed upon). 2 See Robert B. von Mehren, Enforcement of Foreign Judgments in the United States, 17 VA. J. INT L L. 401, 401, 408 09 (1976 77) (arguing that the constitutional necessity of giving effect to foreign state judgments probably led to a more generous approach in recognizing foreign state judgments as compared to the civil law systems of Europe). 3 See ALI/UNIDROIT Principles and Rules of Transnational Procedure, in THE FUTURE OF TRANSNATIONAL LITIGATION: ENGLISH RESPONSES TO THE ALI/UNIDROIT DRAFT PRINCIPLES AND RULES OF TRANSNATIONAL CIVIL PROCEDURE 177, 204 (Mads 43

INTERNATIONAL LAW & MANAGEMENT REVIEW VOLUME 3 However, after more than ten years of negotiating a treaty governing the recognition and enforcement of foreign judgments, the United States can finally celebrate. On June 30, 2005, the United States, along with the other sixty-four member states 4 of the Hague Conference on Private International Law (Hague Conference), concluded the Hague Convention on Choice of Court Agreements (Hague Convention). 5 Unfortunately, problems plagued negotiations from the beginning, making consensus on a larger convention seem impossible. 6 But, instead of abandoning the project when disagreement threatened to end negotiations, the member states limited the Hague Convention s scope to international cases between businesses that had agreed to a choice of forum 7 an area already widely accepted internationally. 8 In anticipation of U.S. acknowledgement of the Hague Convention (whether ratified or not), the American Law Andenas, Neil Andrews, Renato Nazzini eds., 2004) [hereinafter UNIDROIT PRINCIPLES] (emphasizing other countries disapproval of the U.S. concept of longarm and tag jurisdiction). 4 See Hague Conference on Private International Law, Member States, http://www.hcch.net/index_en.php?act=states.listing (last visited Nov. 21, 2006) (providing a list of current member states, the date of their membership, and the agreements each has adopted). 5 Convention on Choice of Court Agreements, concluded June 30, 2005, 44 I.L.M. 1294 [hereinafter Hague Convention]. 6 See, e.g., infra notes 64 65 and accompanying text (describing the difficulties faced by the Preliminary Draft Convention because of its expansive scope). Compare Hague Convention, supra note 5, art. 1(1) (applying the Hague Convention in international cases to exclusive choice of court agreements concluded in civil or commercial matters), with Preliminary Draft Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters, adopted by the Special Commission on Oct. 30, 1999, art.1(1) [hereinafter Preliminary Draft Convention] (stating that the Preliminary Draft Convention applies to civil and commercial matters generally). 7 See Hague Convention, supra note 5, art. 1(1) (3), art. 2(1)(a) (setting forth which civil and commercial matters are included as well as those explicitly exempted from coverage under the Hague Convention). 8 See, e.g., Bremen v. Zapata, 407 U.S. 1, 16 20 (1972) (holding that a forumselection clause negotiated at arm s length by experienced businessmen providing for the treatment of any disputes should be enforced by the courts in absence of some compelling and countervailing reason making enforcement unreasonable); Frank Vischer, Forum Selection and Arbitration Clauses Under the Brussels and Lugano Conventions and Under Swiss Law, in 14 INTERNATIONAL DISPUTE RESOLUTION: THE REGULATION OF FORUM SELECTION 73, 85 (J.L. Goldsmith ed., 1997) (expressing the European courts favorable treatment of forum-selection clauses and the lack of any provision in either the Brussels or Lugano Conventions permitting the courts to disregard such agreements). 44

WINTER 2006 CHOICE OF COURT AGREEMENTS Institute (ALI) has drafted a proposed federal statute 9 to implement the Convention s policies. 10 This comment focuses on the Hague Convention s effect, not only on member states, but also on the United States domestic approach to the recognition and enforcement of foreign judgments. Currently, U.S. jurisprudence on the subject is piecemeal at best, with each state adopting different standards. 11 This comment argues that the United States should ratify the Hague Convention because it promotes U.S. interests abroad by allowing U.S. businesses to seek enforcement of judgments in foreign countries. Ratification will also create a single national standard for the treatment of foreign judgments that is similar to those standards currently used by state governments 12 and consistent with the legal policy already in place. 13 Furthermore, this comment argues that Congress should implement the Hague Convention through compatible legislation that mirrors the agreement rather than adding provisions that disagree with the majority of U.S. jurisprudence and render U.S. law incompatible with the Hague Convention, as the ALI proposes. Part II will discuss the background of U.S. law on forum-selection clauses and the current state of U.S. jurisprudence on the recognition and enforcement of foreign judgments in the United States. Part II will also introduce the Hague Convention, past and present, to get a better sense of the Convention s scope, followed by an examination of the ALI s proposed federal statute. Part III will begin by analyzing the key provisions of the Hague Convention and the certainty they provide to the international business 9 See generally American Law Institute, Publications Catalog, https://www.ali.org/ali/712.htm (last visited Nov. 2, 2006) (stating that the American Legal Institute has begun the task of drafting a separate federal statute in the case that the U. S. Senate does not ratify the Hague Convention). 10 See discussion infra Part II.C. 11 LOUISE ELLEN TEITZ, TRANSNATIONAL LITIGATION: A GUIDE TO LITIGATING HERE AND ABROAD 257 58 (1996). 12 See discussion infra Part II. See generally United States v. Belmont, 301 U.S. 324, 328 332 (1937) (delineating the distribution of power within the United States between the federal and state government, and affirming the exclusive control of the federal government over external affairs). 13 See generally U.S. CONST. art. VI, cl. 2 ( all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby. ). 45

INTERNATIONAL LAW & MANAGEMENT REVIEW VOLUME 3 arena. Part III will then compare the United States approach to forumselection clauses with the Hague Convention s obligatory treatment of choice of court agreements. Part III will also show that the Hague Convention does little more than codify U.S. law, especially because the choice of court agreement settles personal jurisdiction questions. Part III will then conclude with an analysis of the ALI s proposed federal statute, arguing that the inclusion of reciprocity as a requirement for recognition is contrary to U.S. recognition jurisprudence and harmful to international trade. Part IV will recommend that the U.S. Senate ratify the Hague Convention, but will suggest that the U.S. Congress should refrain from adopting the ALI proposed federal statute as a model for implementing legislation. It also will argue that the United States should pursue bilateral negotiations with other nations after ratification to increase the acceptance of U.S. judgments abroad. II. HISTORY AND DEVELOPMENT OF FORUM-SELECTION CLAUSES IN THE UNITED STATES A. U.S. Approach to Forum-Selection Clauses Until the U.S. Supreme Court s decision in Bremen v. Zapata, 14 U.S. courts typically refused to recognize forum-selection clauses as dispositive. 15 In Bremen, the Court decided that forum-selection clauses would be dispositive, absent a showing of unreasonableness. The Court apparently reasoned that parties to an international business contract 16 want to avoid uncertainty by including such clauses after 14 Bremen v. Zapata, 407 U.S. 1 (1972). 15 See Nute v. Hamilton Mut. Ins. Co., 72 Mass. 174, 183 85 (1856) (nullifying the effect of a forum-selection clause in an insurance contract because disturbing the symmetry of law by upsetting the rules regarding jurisdiction was against public policy); Harold G. Maier, The U.S. Supreme Court and the User-Friendly Forumselection clause: The Effect of Carnival Cruise Lines on International Contracts, in 14 INTERNATIONAL DISPUTE RESOLUTION: THE REGULATION OF FORUM SELECTION 53, 56 57 (J.L. Goldsmith, ed. 1997) (relying on Dixilyn Drilling Corp. v. Crescent Towing & Salvage Co., 372 U.S. 697 (1963), and Bisso v. Inland Waterways Corp., 349 U.S. 85 (1955), to argue that the judiciary, as an arm of the sovereign, could not permit private persons to determine where suits could or could not be brought). 16 See Park, supra note 1, at 4 8 (discussing the international business person s fear of biased foreign courts, strange legal practices, and unenforceable judgments to 46

WINTER 2006 CHOICE OF COURT AGREEMENTS negotiating a contract at arm s length, 17 and insert forum-selection clauses to avoid uncertainty in the litigation forum. After the Court s decision in Bremen, the Court let the circuits define reasonableness, but the circuits disagreed about whether to apply federal or state substantive law to choice of court agreements. 18 Federal courts enforce forum-selection agreements, 19 but the extent to which federal courts would enforce such agreements was unclear until Carnival Cruise Lines v. Shute. 20 In Carnival Cruise Lines, the Supreme Court upheld a forumselection clause between the consumer-petitioner and Carnival Cruise Lines because a form passage contract stipulating the resolution of all disputes in Florida was reasonable even though it required a petitioner from Washington to bring a claim in Florida. The Court reasoned that passengers who purchase tickets that include a forum-selection clause should be bound to such contracts because they benefit from lower prices as a result of the cruise line s ability to lower operating costs by stipulating a forum for litigation in the passage contract. 21 The Court noted, however, that courts would only enforce reasonable forumselection clauses. 22 Courts have looked at several factors when determining if a forum-selection clause is reasonable. These factors include the following: (1) the identity of the law which governs the contract; (2) the place of execution of the contract; (3) the place of performance; (4) the availability of remedies in the enumerated forum; (5) the public policy of the chosen forum state; (6) the location of the parties, witnesses, and evidence; (7) the relative bargaining power of the parties when the forum was chosen; (8) the use of fraud, undue highlight the reason that the majority of business managers will either elect to settle disputes through arbitration or agree to submit to a particular jurisdiction). 17 Bremen, 407 U.S. at 12 14. 18 Park, supra note 1, at 10. 19 See, e.g., Stewart Org., Inc., v. Ricoh Corp., 487 U.S. 22, 31 32 (1988) (affirming the enforcement of a forum-selection clause). But see Park, supra note 1, at 9 (stating that, from a state perspective, only New York treats forum-selection clauses as dispositive). See generally N.Y. GEN. OBLIG. 5-1402 (2006) (elaborating New York law on the enforcement of forum-selection clauses). 20 Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991). 21 Id. at 594. 22 Id. at 595. 47

INTERNATIONAL LAW & MANAGEMENT REVIEW VOLUME 3 influence, or other extenuating circumstances; and (9) the conduct of the parties. 23 Typically, if a U.S. federal court finds that a forum-selection clause is reasonable, the court will honor it by granting a defendant s motion to dismiss the action or stay proceedings until the court in the forum of choice renders a judgment. 24 B. U.S. Approach to Recognizing Foreign Judgments Although U.S. federal courts have enforced international forumselection clauses since the Supreme Court s decision in Bremen, they have not developed a unified approach when it comes to the recognition and enforcement of foreign judgments. 25 Until it signed the Hague Convention, the United States, with a few special exceptions, 26 was not party to any treaty governing the recognition and enforcement of foreign judgments. 27 Furthermore, Congress has never passed a law dictating when federal courts should recognize foreign judgments. 23 E.g., D Antuono v. CCH Computax Sys., Inc., 570 F.Supp. 708, 715 16 (D.R.I. 1983). 24 See, e.g., id. (upholding a forum-selection clause between two businesses after the defendant, who had successfully removed the case from state superior court, moved to transfer venue from the U.S. District Court of Rhode Island to the District Court for the Southern District of California because the defendant failed to prove that the forum was unreasonable). But see Dart v. Balaam, 953 S.W.2d 478, 481 482 (Tex. App. 1997) (recognizing that provisions of a forum-selection clause, like any other contractual right, can be waived). 25 See RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW 481 (1987) (asserting that the prevalent statutory and common law on the matter of recognition and enforcement generally separates the process into two steps: recognition followed by enforcement); see also Willis L. M. Reese, Status in this Country of Judgments Rendered Abroad, 50 COLUM. L. REV. 783, 788 (1950) (discussing the value of a national standard as opposed to current inconsistent state standards). 26 The United States joined the international community in regulating the enforcement of arbitral awards when it acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ( New York Convention ) in 1970. See Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38 (mandating that members States must recognize and enforce a decision between parties to arbitrate disputes, as well as treat arbitral awards as binding, and enforce them in accordance with the applicable rules of procedure). 27 See supra note 1 and accompanying text. 48

WINTER 2006 CHOICE OF COURT AGREEMENTS Congress inaction has left the decision of whether to recognize and enforce foreign judgments to the federal courts. 1. Recognition under federal common law In 1895, the U.S. Supreme Court established the basis of federal common law policy for the recognition and enforcement of foreign judgments when it ruled against French foreign judgment creditors in Hilton v. Guyot. 28 The Court relied on comity and reciprocity as the major factors in determining whether it should give force to the foreign judgment. 29 The Court noted that comity is neither an obligation imposed upon States nor is it a display of courtesy between them, but it is the recognition that one nation gives to the acts of another government as consideration to the nation s international duty and the rights of its citizens. 30 The Court continued by enumerating a more specific list of factors that a foreign judgment should meet before becoming enforceable. First, the judgment must be the result of a fair trial in a court of competent jurisdiction within a judicial system that will not discriminate against citizens of other countries. 31 A judgment obtained through fraud will not satisfy these conditions. 32 Second, the defendant must either receive due notification of the suit or appear voluntarily. 33 While finding that the French judgment met these requirements, the Court declined to recognize the judgment due to a lack of 28 Hilton v. Guyot, 159 U.S. 113 (1895). 29 See id. at 143 44, 168; see also AM. BAR ASS N SECTION OF INT L LAW AND PRACTICE, ENFORCING FOREIGN JUDGMENTS IN THE UNITED STATES AND UNITED STATES JUDGMENTS ABROAD 3 (Ronald A. Brand ed., 1992) [hereinafter AM. BAR ASS N SECTION OF INT L LAW AND PRACTICE] (granting that most courts begin with a comity analysis as enunciated by Hilton even though state law is supposed to be controlling); see also Reese, supra note 25, at 790 (examining Hilton in order to detail the history of the reciprocity requirement in the recognition and enforcement of foreign judgments because it remains the most detailed exposition of the controlling principles). 30 Hilton, 159 U.S. at 163 64 (defining comity, the Supreme Court asserted that recognition and enforcement was a matter of public international law). 31 See id. at 123. 32 See id. 33 See id. at 201 (contemplating the international use of comity and the requirements set forth by other countries to announce the set of factors U.S. comity analyses would consider). 49

INTERNATIONAL LAW & MANAGEMENT REVIEW VOLUME 3 reciprocity, 34 meaning that France would not have enforced a U.S. judgment under the same circumstances. The federal common law approach has not changed a great deal since Hilton, but a majority of the circuits and states no longer apply the reciprocity requirement in the recognition process. 35 Hilton dealt with the recognition and enforcement of foreign judgments as a matter of public international law, but this is not surprising considering the decision s lengthy discussion of comity. Johnston v. Compagnie Generale Transatlantique changed all of this in 1926. 36 The New York Court of Appeals held that the recognition and enforcement of foreign judgments was a matter of state law. The effect of Johnston increased with the decision in Erie R.R. v. Tompkins, which nullified Hilton s effect by eliminating the federal common law. 37 These cases, therefore, have eliminated the national standard for recognition and enforcement of foreign judgments and left 34 See id. at 227 29. 35 See, e.g., Mata v. Am. Life Ins. Co., 771 F. Supp. 1375, 1382 (D. Del. 1991) (interpreting the Delaware Supreme Court s criticism of the reciprocity rule in Bata v. Bata, 163 A.2d 493 (Del. 1960), to mean that Delaware no longer required reciprocity as a prerequisite to recognition of a foreign judgment). While Delaware recognition law mirrored Hilton, Mata, 771 F. Supp. at 1382, Delaware adopted the Uniform Foreign Money-Judgment Recognition Act in 1997, 10 DEL. CODE ANN. tit. 10, 4801 08 (2005). Freidrich K. Juenger, The Recognition of Money Judgments in Civil and Commercial Matters, 36 AM. J. COMP. L. 1, 33 (1988) (noting that the reciprocity requirement established in Hilton became obsolete as the recognition process became state-centered because an increasing number of states continued to adopt the Uniform Foreign Money-Judgments Act that omits that requirement). 36 See Johnston v. Compagnie Generale Transatlantique, 152 N.E. 121, 123 (N.Y. 1926) (holding that that it was the settled law of New York that a foreign judgment is conclusive upon the merits). The court held that foreign judgments can only be impeached by proof that the court in which it was rendered did not have subject matter jurisdiction over the action, personal jurisdiction over the defendant, or that a decision was procured by means of fraud. Id. 37 See Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938); see also AM. BAR ASS N SECTION OF INT L LAW AND PRACTICE, supra note 29, at 7 (explaining the effects of Erie in that it created four different sources of law for federal district courts: (1) enactment of the Uniform Foreign Money-Judgments Act, (2) prior state court decisions, (3) prior federal court decisions saying what law the state would have applied, and (4) state statutes or case law requiring the court to reference sources outside the state); Banque Libanaise Pour Le Commerce v. Khreich, 915 F.2d 1000, 1003 (5th Cir. 1990) (construing Erie in a recognition and enforcement proceeding in Texas of an Abu Dhabi judgment to require the application of state law in the proceeding). 50

WINTER 2006 CHOICE OF COURT AGREEMENTS the states to decide how and when they would deal with foreign judgments. 2. Effects of U.S. jurisprudence on recognition and enforcement of foreign judgments As a result of the Court s decisions in Johnston and Erie, foreign lawyers and their clients have trouble deciding where to seek recognition of a foreign judgment in the United States because the requirements vary from forum to forum. Some states still require reciprocity from the country of origin. 38 However, the situation is more difficult for parties seeking to enforce a U.S. judgment abroad. 39 When the enforcing court requires reciprocity from the original U.S. court, American judgment creditors 40 carry the burden of proving that reciprocity exists in the state or district court that decided the case. 41 Luckily, most states have either followed the Restatement (Third) of Foreign Relations Law, which closely mirrors the federal common law standard adopted in Hilton, or have adopted some form of the 38 See TEITZ, supra note 11, at 273 (1996) (articulating the usefulness of maintaining reciprocity as a defense in the seven states that still require it). 39 See British Midland Airways Ltd. v. Int l Travel, Inc., 497 F.2d 869, 871 (9th Cir. 1974) (characterizing the application of comity to foreign judgments as a relatively simple matter except in cases where the country s judgments are the result of outrageous departures from our own notions of civilized jurisprudence ); see also Bridgeway Corp. v. Citibank, 201 F.3d 134, 141 42 (2d Cir. 2000) (elaborating on the evidence produced by Citibank, which included U.S. State Department Country reports, used to prove that the Liberian judicial system was in a state of chaos and failed to meet due process standards at the time of their trial). Citibank s evidence persuaded the Second Circuit Court of Appeals to affirm the trial court s decision to reject the judgment creditor s motion for summary judgment and grant summary judgment sua sponte in favor of Citibank. Id. at 139 43. 40 In this comment judgment creditor denotes a party that has successfully litigated a case and has been awarded a money-judgment. The party is a creditor in the sense that the judgment imposes an obligation on the opposing party to pay the judgment. Conversely, a judgment debtor is another name for the defendant in the original action against whom the court ruled. 41 See Hilton v. Guyot, 159 U.S. 113, 167 68 (1895) (addressing the recognition and enforcement of foreign judgments for the first time, the U.S. Supreme Court crafted a rule based on comity); see also TEITZ, supra note 11, at 253, 257 (restating that the common law approach to recognition and enforcement is based on the U.S. Supreme Court decision in Hilton). 51

INTERNATIONAL LAW & MANAGEMENT REVIEW VOLUME 3 Uniform Foreign Money-Judgments Act. 42 In fact, a quick comparison of the three bodies of law shows that they are not that different. 43 3. Uniform Foreign Money-Judgments Act and the Restatement (Third) of Foreign Relations Law The Restatement (Third) of Foreign Relations Law (Restatement), 44 which mirrors federal common law, and the Uniform Foreign Money-Judgments Act are very similar to each other, but with one major exception. 45 The Uniform Foreign Money-Judgments Act, 46 as suggested by its name, governs only the recognition and enforcement of foreign money judgments, while the Restatement covers the recognition and enforcement of any type of foreign judgment. 47 Although the Restatement embodies the approach of many states with slight variations, the Uniform Foreign Money-Judgments Recognition Act has been more successful in creating a single 42 See Andreas F. Lowenfeld & Linda J. Silberman, United States of America, in ENFORCEMENT OF FOREIGN JUDGMENTS WORLDWIDE 123 (Charles Platto & William G. Horton eds., 2d ed. 1993) (admitting that while no federal law governs the recognition and enforcement of foreign judgments, the practice among the 50 states does not vary widely). 43 See id. at 124 (insisting that the practice of recognizing foreign judgments does not differ a great deal among the 50 states, partly because of the reliance upon common law); see also Bridgeway Corp. v. Citibank, 201 F.3d 134, 141 (2d Cir. 2000) (overlooking the district court s incorrect decision to apply New York law instead of the federal standard because the fundamental similarities removed any chances of that decision having a material effect on the outcome); discussion infra part III.B (grouping the three approaches together because of their similarities for the purposes of comparing the Hague Convention with current U.S. law in order to illustrate their minor differences, and to encourage ratification of the Hague Convention). 44 RESTATEMENT (THIRD) FOREIGN RELATIONS LAW 481 83 (1987). 45 See AM. BAR ASS N SECTION OF INT L LAW AND PRACTICE, supra note 29, at 10 (observing that the Uniform Recognition Act and the Restatement codify the comity analysis of Hilton, and, in general, provide the same grounds for refusing to recognize foreign judgments). By comparing the two on the chart provided, it becomes clear that the only major distinction is the inclusion of the lack of subject matter jurisdiction as mandatory grounds for non-recognition under the Uniform Recognition Act, while the Restatement treats it as discretionary. Id. 46 UNIF. FOREIGN MONEY-JUDGMENTS RECOGNITION ACT, 13 U.L.A. 274 (1986). 47 See id. 1(2) (defining foreign judgment as any judgment of a foreign country for a sum of money). 52

WINTER 2006 CHOICE OF COURT AGREEMENTS approach to the recognition and enforcement of foreign money judgments. 48 More simply, the Restatement s approach has slowly given way to the Uniform Foreign Money-Judgments Recognition Act s approach. 49 Both sources require that the judgment for which the parties seek recognition be final, 50 but allow a stay in the proceedings if the foreign judgment is under appeal. 51 The Uniform Foreign Money-Judgments Recognition Act and the Restatement also require the non-recognition of foreign judgments when there is a lack of due process or when the originating court lacked personal jurisdiction. 52 They differ slightly, however, over the question of subject matter jurisdiction. The Uniform Foreign Money-Judgments Recognition Act makes the lack of subject matter jurisdiction a mandatory reason for non-recognition while the Restatement makes it optional. 53 48 See infra note 50 and accompanying text (stating that thirty-two of the fifty states have adopted the Uniform Foreign Money-Judgments Recognition Act). 49 See, e.g., DEL. CODE ANN. tit. 10, 4801 08 (1997) (codifying the Uniform Foreign Money-Judgments Recognition Act for use in Delaware). Thirty-two states have adopted the UFMJRA in some form, twelve of which have joined since 1990. UNIF. FOREIGN MONEY-JUDGMENTS RECOGNITION ACT, 13 U.L.A. 264 (1986). 50 See UNIF. FOREIGN MONEY-JUDGMENTS ACT 2; RESTATEMENT (THIRD) FOREIGN RELATIONS LAW 481 cmt. e (1986). 51 See AM. BAR ASS N SECTION OF INT L LAW AND PRACTICE, supra note 29, at 10 (illustrating the approach of the UFMJRA and the Restatement with regard to the requirement of finality in recognizing and enforcing foreign judgments). 52 See UNIF. FOREIGN MONEY-JUDGMENTS RECOGNITION ACT 4(a)(1) (2); RESTATEMENT (THIRD) FOREIGN RELATIONS LAW 482(1)(a) (b); see also Somportex Ltd. v. Philadelphia Chewing Gum Corp., 453 F.2d 435 (3d Cir. 1972) (refusing to accept a due process complaint against an English default judgment because of the rule from Morris v. Jones, 329 U.S. 545 (1947), in which the U.S. Supreme Court ruled that a default judgment would be treated just as judgment on the merits when the defendant is afforded proper notice). But see Dart v. Balaam, 953 S.W.2d 478, 480 (Tex. App. 1997) (indicating that the due process exception of the Texas Uniform Foreign Country Money-Judgment Act does not require that the procedures taken in the foreign country, in this case, Australia, be identical to those established in the United States). The court also prohibited the judgment debtor from attacking the Australian judgment on a matter already litigated, holding that grounds for nonrecognition may be waived if a party fails to assert the defense in the original proceeding despite the opportunity to do so. Id. 53 See UNIF. FOREIGN MONEY-JUDGMENTS RECOGNITION ACT 4(a)(3); RESTATEMENT (THIRD) FOREIGN RELATIONS LAW 482(2)(a) ( A court in the United States need not recognize a judgment of the court of a foreign state if the court that rendered the judgment did not have jurisdiction of the subject matter of the action. ). 53

INTERNATIONAL LAW & MANAGEMENT REVIEW VOLUME 3 The Restatement lists the following six discretionary grounds for non-recognition: (1) the foreign court lacks jurisdiction over the subject matter of the case, (2) the defendant is unable to defend the case due to insufficient notice, (3) either party uses fraud to obtain the judgment, (4) the cause of action is repugnant to U.S. public policy, (5) the foreign judgment conflicts with another judgment entitled to recognition, and (6) the judgment was rendered in a court contrary to an agreement between the parties to litigate in a particular forum. 54 The Uniform Foreign Money-Judgments Act allows courts to consider six factors as well, but they vary slightly from those listed in the Restatement. 55 The most notable of these differences is the inclusion of forum non conveniens 56 in the Uniform Foreign Money- Judgments Act s list of discretionary factors. 57 While both of these sources are widely used, it is important to remember that each state 54 RESTATEMENT (THIRD) FOREIGN RELATIONS LAW 482(2)(a) (f) (1987). 55 See UNIF. FOREIGN MONEY-JUDGMENTS RECOGNITION ACT 4(b)(1) (6) (holding that subject matter jurisdiction is required, not optional, and permitting denial of recognition when the foreign court was a seriously inconvenient forum for the trial of the action ); see also Telnikoff v. Matusevitch, 702 A.2d 230, 236 37, 238 n.12 (Md. 1997) (employing 10-704 of the Maryland Uniform Foreign-Money Judgments Recognition Act, which specifies that a foreign judgment may be refused recognition when the cause of action upon which it is based is repugnant to the public policy of the state, to deny recognition to a British libel judgment). But see Ackerman v. Levine, 788 F.2d 830, 842 43 (2d Cir. 1986) (emphasizing that the public policy exception to the recognition of foreign judgments should be construed narrowly, especially when it is possible to recognize and enforce a foreign judgment based on a cause of action that does not exist in the United States); Southwest Livestock & Trucking Co. v. Ramon, 169 F.3d 317, 321 (5th Cir. 1999) (reiterating that recognition of a foreign judgment in Texas will not be denied on public policy grounds unless it would significantly conflict with Texas law). The court continues by saying that the narrowness of the public policy exception results from a compromise between the principles of res judicata and fairness to litigants. Id. 56 See Piper Aircraft Co. v. Reyno, 454 U.S. 235 (1981) (holding that courts can use a forum non conveniens motion to deny a plaintiff s forum choice). Courts claim that it increases judicial efficiency and decreases inconvenience to the parties, but opponents of forum non conveniens argue that foreign plaintiffs typically bring cases against corporate defendants with ties to the United States, so the United States has a substantial interest in adjudicating these disputes. John R. Wilson, Comment, Coming to America to File Suit: Foreign Plaintiffs and the Forum Non Conveniens Barrier in Transnational Litigation, 65 OHIO ST. L.J. 659, 662 (2004). 57 UNIF. FOREIGN MONEY-JUDGMENTS RECOGNITION ACT 4(b)(6). 54

WINTER 2006 CHOICE OF COURT AGREEMENTS can modify the approach it chooses. 58 For example, some of the states following the Restatement s approach also require reciprocity, even though the majority of them feel that they no longer need it. 59 C. Hague Convention on the Choice of Court Agreements The United States persuaded the Hague Conference on Private International Law to begin working on a convention for the recognition and enforcement of foreign judgments in the early 1990s. 60 The Preliminary Draft Convention included a broader scope than the Hague Convention, and had aspirations of becoming the larger international cousin of the Brussels 61 and Lugano Conventions. 62 The 58 Cf. id., Commissioner s Prefatory Note (requesting states to adopt the Uniform Foreign Money-Judgments Recognition Act because codification will increase the likelihood that foreign courts will recognize state judgments). 59 See Tahan v. Hodgson, 662 F.2d 862, 868 (D.C. Cir. 1981) (construing federal and District of Columbia law to no longer require reciprocity). The court, in line with this comment, also suggests that any type of reciprocity requirement should be applied nationally because any decision regarding the effect of a foreign nation s scrutiny of a U.S. decision is political in nature. Id. See also In re Colo. Corp. v. Lam, 531 F.2d 463, 469 (10th Cir. 1976) (finding that the bankruptcy court abused its discretion in denying comity to the orders of a foreign court when no evidence was presented on whether a U.S. judgment would be granted comity). The appellant s failure to prove that Luxembourg and Netherlands Antilles would grant comity to U.S. judgments was made immaterial by the appellee s failure to prove the lack of comity. Id. Interestingly, the court in In re Colo. Corp. was not questioning whether to grant comity on the basis of reciprocity in Luxembourg and Netherlands Antilles, but the lack of reciprocity in Canada. Id. at 468. The court acknowledged that reciprocity was a concern, but concluded that denying comity on such grounds was a misdirected use of the reciprocity consideration. Id. 60 See Hugh F. Bangasser & Toussant Myricks, Procedural Aspects of International Civil Litigation: Selected Issues Relating to Service of Process, Foreign Discovery for U.S. Litigation and Enforcement of Judgments, in INTRODUCTION TO TRANSNATIONAL LEGAL TRANSACTIONS 1, 17 (Marylin J. Raisch & Roberta I. Shaffer eds., Oceana Publications, Inc. 1995) (articulating the United States willingness in becoming a signatory to a convention covering the recognition and enforcement of foreign judgments in its proposal to the Hague Conference on Private International Law in May of 1992). 61 Council Regulation 44/2001, 2000 O.J. (L 12) 1 (EC). 62 See Andreas F. Lowenfeld, Setting the Stage, in THE HAGUE CONVENTION ON JURISDICTION AND JUDGMENTS: RECORDS OF THE CONFERENCE HELD AT NEW YORK UNIVERSITY SCHOOL OF LAW ON THE PROPOSED CONVENTION 1, 3 (Andreas F. Lowenfeld & Linda J. Silberman eds., 2001) (proffering that the Hague Convention drew inspiration from the Brussels Convention and the Lugano Convention just as 55

INTERNATIONAL LAW & MANAGEMENT REVIEW VOLUME 3 Preliminary Draft Convention covered international litigation involving civil and commercial matters, except those proscribed by paragraph two of article one, 63 which includes tort actions and consumer contracts. 64 However, the project was put on hold because of major disagreements over jurisdictional issues, 65 and the Hague Convention was subsequently trimmed down, giving the courts of member States jurisdiction over international cases to exclusive choice of court agreements concluded in civil or commercial matters. 66 they drew inspiration from the U.S. Full Faith and Credit Clause); see also Hague Conference on Private Int l Law, International Jurisdiction and Foreign Judgments in Civil and Commercial Matters, at 8, Prelim. Doc. No. 7 (Apr. 1997) (drawn up by Catherine Kessedjian), http://www.hcch.net/upload/wop/jdgm_pd7.pdf (examining the Brussels and Lugano Conventions successful recognition and enforcement schemes to illustrate that the Preliminary Draft Convention should continue to embody the principles of a double convention. Why? Because defining the direct jurisdiction of courts in member States is as important to reaching a meaningful agreement as establishing a consensus on the effects of that judgment in the territory of the other member States). 63 See Prelimary Draft Convention, supra note 6, art. 1, 2 (removing the status and legal capacity of persons, matrimonial property regimes, wills and succession, insolvency, social security, arbitration and related proceedings, and admiralty and maritime matters from the scope of the Preliminary Draft Convention); see also id. art. 1, 1 (excluding revenue, customs, and administrative matters from the scope of the Preliminary Draft Convention). 64 See id. arts. 7, 10 (creating jurisdiction for a court to hear tort and personal contract cases when the court resides in the same State in which the occurrence giving rise to the tort action occurred, and/or personal contract cases where the consumer took the steps necessary to conclude the contract in the State of the court where the suit is brought). 65 See Hague Conference on Private Int l Law, Preliminary Draft Convention on Exclusive Choice of Court Agreements, at 4, Prelim. Doc. No. 26 (Dec. 2004) (prepared by Trevor C. Hartley & Masato Dogauchi), http://www.hcch.net/upload/ wop/jdgm_pd26e.pdf [hereinafter Draft Report] (noting that the 1999 Draft Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters was abandoned because its expansive scope made reaching an agreement seemingly impossible); see also Mehren, supra note 2, at 192 (introducing a letter from Jeffrey Kovar, Assistant Legal Adviser and Head of the U.S. Delegation, to the Secretary General of the Conference, which decried the current negotiation method and its inability to address serious defects in the Preliminary Draft Convention, in order to illustrate the United States unease with proceeding in scheduling the next step for the Preliminary Draft Convention). 66 Hague Convention, supra note 5, art. 1. 56

WINTER 2006 CHOICE OF COURT AGREEMENTS The Hague Convention on Choice of Court Agreements consists of a number of key articles that can be broken down for clarity. 67 Articles one and two establish the scope of the Hague Convention. 68 Article one states that the convention shall cover international cases involving choice of court agreements in civil or commercial matters. 69 Article two, on the other hand, is proscriptive. It removes a list of civil or commercial subjects that some nations could consider, such as anti-trust matters, insolvency, employment contracts, tort claims, and personal contracts. This provision narrowed the focus of the Hague Convention to subject matter upon which the members of the Hague Conference on Private International Law could agree. Notably, this included business contracts to which a State was a party. 70 Paragraph five of article two includes a provision that expressly permits suits against foreign sovereigns by businesses from other countries. Article three is important in that it sets forth the requirements that govern the choice of court agreement and includes factors that will have an appreciable impact on companies involved in international contracting. Article five states that a court or forum chosen in a choice of court agreement shall have jurisdiction over the dispute. 71 Paragraph two of 67 See id. at art. 7 (excluding interim measures from the scope of the Convention); see also Hague Conference on Private Int l Law, Comments from the United States of America on the December 2004 Report on the Preliminary Draft Convention on Exclusive Choice of Court Agreements, at 5, Prelim. Doc. No. 29 Addendum 1 (June 2005), http://www.hcch.net/upload/wop/jdgm_pd29_add.pdf (responding to the draft report, the U.S. delegation stated that in order to best understand the Hague Convention, the report should begin with an overview of articles five, seven (now six), and nine, as opposed to beginning with article one). 68 See infra notes 69, 70 (elaborating on articles 1 and 2 of the Hague Convention). 69 Hague Convention, supra note 5, art. 1; see also Draft Report, supra note 65, 63 (asserting that while the Hague Convention will predominantly affect the original parties to the agreement, it will, in some cases, bind third parties when their right to bring the proceedings depends on an assignment from one of the original parties). 70 Hague Convention, supra note 5, art. 2(5) (allowing application of the Hague Convention to States). But see Draft Report, supra note 65, 58 60 (narrowing the application of the Hague convention to those instances when a State is party. Those instances being when a State is exercising powers similar to those of private individuals; this avoids interference with governmental immunity). 71 Hague Convention, supra note 5, art. 5(1). 57

INTERNATIONAL LAW & MANAGEMENT REVIEW VOLUME 3 article five, however, warrants special attention because it proscribes the use of forum non conveniens to thwart the choice of court agreement. It reads, A court that has jurisdiction under paragraph one shall not decline to exercise jurisdiction on the ground that the dispute should be decided in a court of another State. 72 Article six establishes a second set of obligations equally as important. It requires courts not selected by the choice of court agreement to suspend or dismiss proceedings to which an exclusive choice of court agreement applies. This requirement is waived when any of the four following conditions are met: (1) the agreement is null and void under the law of the State of the chosen court; (2) one of the parties lacked the capacity to conclude the agreement under the law of the State seized; (3) dismissing the proceedings would lead to injustice or contradict the law of the State seized; or (4) the court chosen by the parties to hear the case has refused. 73 Articles eight and nine move from the jurisdictional issues covered in earlier articles to the recognition and enforcement of foreign judgments resulting from choice of court jurisdiction. 74 Article eight requires the courts to enforce the judgment without reviewing the merits of the case where a judgment creditor has filed suit, unless the foreign judgment was a default judgment. 75 Article nine, on the other hand, lists seven reasons why a court of a member State could deny 72 Id. art. 5(2). 73 Id. art. 6. 74 Id. art. 8(1) (5). 75 See Hague Convention, supra note 5, art. 8 (allowing courts to review judgments on the merits in cases they are being asked to recognize when the rendering court s judgment is based on a default by one of the parties); id. art. 14 (allowing States that have ratified the Hague Convention to establish separate procedures for recognizing and enforcing foreign judgments within their nation so long as they act expeditiously); see also MacDonald v. Grand Trunk Ry. Co., 52 A. 982, 985, 987 (N.H. 1902) (holding that a judgment on the merits, in an action for a loss instituted and litigated to its conclusion in a Canadian court of general jurisdiction having jurisdiction of the parties, was a conclusive defense to a subsequent action for the same loss instituted in New Hampshire, regardless of whether the stipulation against liability was void or not under the laws of New Hampshire). The concept of res judicata has been applied to foreign judgments by U.S. courts for quite a long time in certain areas of the law. Lowenfeld & Silberman, supra note 42, at 123, 126, 132. U.S. courts have also accepted the use of foreign judgments as a defense against new claims, giving life to the collateral estoppel effect of foreign judgments. Reese, supra note 25, at 788. 58

WINTER 2006 CHOICE OF COURT AGREEMENTS the recognition and enforcement of a foreign judgment from a court in another member State. 76 These factors include the invalidity of the choice of court agreement, a party s incapacity to conclude such an agreement, insufficient service to the judgment debtor, fraud, and instances where recognizing the foreign judgment is incompatible with public policy of the requested State. 77 The remaining articles of the Hague Convention, such as provisions for the severability of the choice of court agreement, transitional application, and the inclusion of regional economic integration organizations like the European Union, are important but do not merit inclusion here because they deal more with the procedural aspects of the Hague Convention as opposed to the substantive issues of jurisdiction and recognition. 78 D. ALI Proposed Federal Statute The ALI began preparing a proposed statute for the U.S. Congress to implement the convention in the event that the President signed the treaty and the Senate ratified it. 79 The ALI was forced to change focus when the original convention was scrapped by the Hague Conference on Private International Law, and then replaced with the Hague Convention on Choice of Court Agreements. 80 The ALI continued work on the project but decided to draft a statute that Congress could adopt even in the absence of a Hague Convention. 81 76 See Hague Convention, supra note 5, art. 9(a) (g) (using may to condition the decision to apply any of the factors listed as opposed to shall or must ). 77 See id. (enumerating factors that a court can consider in determining whether a foreign judgment should be recognized, including two possibilities in which the foreign judgment in question would be inconsistent with a prior judgment between the parties in the same State, or inconsistent with a prior judgment from a different State that fulfills the requirements for recognition in the requested State). 78 Id. arts. 15, 16, 29. 79 See George Slyz, International Law in National Courts, in INTERNATIONAL LAW DECISIONS IN NATIONAL COURTS (Thomas M. Franck & Gregory H. Fox eds., 1995) 71, 85 88 (iterating that U.S. courts have established that federal statutes and self-executing treaties are of equal status, but, in practice, implementing legislation is required because Congress finds most treaties to be non-self-executing). 80 See infra note 82 and accompanying text. 81 See Lance Liebman, Foreword to AM. LAW INST., RECOGNITION AND ENFORCEMENT OF FOREIGN JUDGMENTS: ANALYSIS AND PROPOSED FEDERAL STATUTE, xi (Proposed Final Draft 2005) (emphasizing that the ALI project on the recognition 59

INTERNATIONAL LAW & MANAGEMENT REVIEW VOLUME 3 The ALI proposed statute is notable for two reasons: (1) it retains a scope similar to that of the Preliminary Draft Convention, 82 and (2) it imposes a reciprocity requirement. 83 However, the future of the ALI proposed statute and its impact upon federal legislation are uncertain. Although members of the ALI approved the proposed final draft at the 82nd Annual Meeting, held from May 16 18, 2005, despite motions to quash the project, 84 the Hague Convention was not signed until June 30, 2005. 85 The ALI apparently foresaw the problem of drafting a proposed federal statute because it amended the introduction of the proposed final draft while negotiations within the Hague Conference on Private International Law were still underway. 86 The introduction now states that the proposed statute serves as a concrete expression of the ALI s stance on the recognition and enforcement of foreign judgments, abandoning any pretense of codifying the Hague Convention. 87 III. ANALYSIS Even though the Hague Convention is limited in scope compared to the Preliminary Draft Convention, the United States should ratify it and enforcement of foreign judgments would continue despite roadblocks at the Hague Conference in order to present a model federal statute for Congress to adopt). 82 FOREIGN JUDGMENTS RECOGNITION AND ENFORCEMENT ACT 1(a) (Proposed Final Draft 2005) [hereinafter FOREIGN JUDGMENTS ACT] (providing that the Act shall apply to all foreign judgments other than judgments for divorce, support, maintenance, division of property, custody, adoption, other matters of domestic relations, bankruptcy, liquidation, and foreign arbitral awards). 83 Id. 7 (resurrecting the reciprocity requirement imposed in Hilton by allowing judgment debtors to use the lack of reciprocity as a defense as long as they can prove there is substantial doubt that the courts of the state of origin would enforce a comparable U.S. judgment). 84 AM. LAW INST., ACTIONS TAKEN WITH RESPECT TO DRAFTS SUBMITTED AT 2005 ANNUAL MEETING 6, https://www.ali.org/ali/am05actionstaken.pdf (last visited Nov. 17, 2006) (disregarding a motion to reject the statute and approving the proposed final statute as amended). 85 Hague Convention, supra note 5. 86 AM. LAW INST., RECOGNITION AND ENFORCEMENT OF FOREIGN JUDGMENTS: ANALYSIS AND PROPOSED FEDERAL STATUTE 6 (Amended Proposed Final Draft 2005). 87 Am. Law Inst., Members OK Bylaw Amendment, Approve Final Drafts for Agency Restatement and Foreign Judgments Project, A.L.I. REP., Summer 2005, at 2, available at https://www.ali.org/ali/r2704_03-okbylaw.htm (confirming ALI s position that the final proposed statute would serve as an important guide in the legislative and judicial process, even if it s never adopted by Congress). 60